Bank of Canada increases overnight rate target to 1 per cent
bankofcanada.ca
Bank of Canada increases overnight rate target to 1 per cent
1–10 of 214 posts
Re: Bank of Canada increases overnight rate target to 1 per cent
#2For those like me who didn't know what the over night rate is:
"The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or `overnight`) funds among themselves; the Bank sets a target level for that rate."
http://www.bankofcanada.ca/core-functions/monetary-policy/ke...
Re: Bank of Canada increases overnight rate target to 1 per cent
#3Previous rate was 0.75%
Re: Bank of Canada increases overnight rate target to 1 per cent
#4[deleted]
Re: Bank of Canada increases overnight rate target to 1 per cent
#5The exchange rate between the USD and CAD jumped by over 1% at the announcement despite it being widely expected:
Re: Bank of Canada increases overnight rate target to 1 per cent
#6For those like me who didn't know what the over night rate is: "The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or `overnight`) funds among themselves; the Bank sets a target level for that rate." http://www.bankofcanada.ca/core-functions/monetary-policy/ke...
More importantly, the "prime rate" at the banks almost always is relative to the overnight rate, and almost all short term or floating interest rates are relative to the prime rate.
Re: Bank of Canada increases overnight rate target to 1 per cent
#7So what exactly does this entail?
Re: Bank of Canada increases overnight rate target to 1 per cent
#8http://www.ctvnews.ca/bank-of-canada-raises-overnight-rate-t...
> The move, which will likely be a surprise for some, came less than a week after the latest Statistics Canada numbers showed the economy expanded by an impressive 4.5 per cent in the second quarter.
> "Recent economic data have been stronger than expected, supporting the bank's view that growth in Canada is becoming more broadly-based and self-sustaining," the bank said.
> The rate increase means governor Stephen Poloz has now reversed the two cuts he introduced in 2015 to help the economy deal with the plunge in oil prices. The bank said Wednesday the increasingly robust economy shows it no longer needs as much stimulus.
> Others predicted the bank would refrain from moving the rate out of concern such a move would drive up an already strengthening Canadian dollar and pose a risk to exporters.
> In its statement, the bank also said headline and core inflation have seen slight increases since July, largely as expected. It noted, however, that upward pressure on wages and prices remain more subdued than historical trends would suggest, which has also been seen in other advanced economies.
Re: Bank of Canada increases overnight rate target to 1 per cent
#9For those not following Canada's economy. Two weeks ago no one was sure if they'd hike the rate again, and no one thought they'd do it so quickly (though it seemed likely they'd do it ~oct/nov).
But, Canada posted exceptionally strong growth numbers (4.5%) at the end of August, which kind of made this very likely.
Also, the government just sold bonds that mature in 2064 (at 2.2%) and has indicated that it might issue more "ultra-long bonds" in the coming months.
All this to say, money's going to stop being cheap.
Re: Bank of Canada increases overnight rate target to 1 per cent
#10Relatedly, the Toronto housing market that kept shooting up even as the US hit its 2008 housing crisis now have hit their top:
https://www.bloomberg.com/news/articles/2017-09-06/toronto-h...